31 Oct 2022

New CIH research shows 41 per cent of private landlords would quit the market under Northern Ireland rent freeze

People looking for new private rented accommodation would face a further shortage of suitable housing options if rents were frozen, according to new research conducted by the Chartered Institute of Housing Northern Ireland for the Department for Communities.

Justin Cartwright, CIH NI national director discusses the report which shows between 41 and 60 per cent of landlords would seek to exit the market if rents were frozen or cut:

As the cost of living crisis continues to impact communities across these islands, introducing and tightening private rent control is on the political agenda. The Irish government has capped allowable rent increases at two per cent in rent pressure zones if inflation is higher. In Scotland the government passed emergency legislation to freeze rents and ban evictions, which also covers social housing.

It is laudable that governments want to protect tenants from cost of living increases. However, as a policy tool, rent control is a pandora’s box of significant and negative consequences for strategic housing outcomes.

Not all rent control is created equally. For example, there are systems that allow landlords to account for cost increases and invest in repairs and improvements. But the harder the control the greater the tendency to create systems with negligible impact, complicated and unclear outcomes, or at worst undesired effects.

The hardest rent controls – such as rent freezes or cuts – ultimately lead to a drop in supply. Examples of this include a recent, short-lived rent freeze in Berlin which caused a substantial decline in rental properties there. Hard rent control in the Netherlands is credited with a low amount of private rented housing. Controls in parts of the US have also been shown to reduce supply.

In Northern Ireland, the Private Tenancies Act 2022 was amended to give the Department for Communities the power to freeze rents and/or cut them by up to ten per cent for a period of up to four years. The department commissioned us to research the potential impact of this measure.

The results of our research show that between 41 and 60 per cent of landlords would seek to exit the private rental market. Overall, a rent freeze or reduction would largely benefit existing tenants who remain in their homes and whose landlords do not sell or repurpose their properties.

We also found that freezing and reducing rents to protect people on the lowest incomes would be a very unpredictable and inefficient approach. A simpler and accurately targeted way to improve housing affordability is to offer more help with housing costs for those in need.

Of course, the best way of relieving pressure on prices is by having enough housing supply. There is a shortage of private rented accommodation at present; data from PropertyPal shows that the average stock of properties for rent on the website during June 2022 was 1,647 – a 57 per cent decrease from June 2019.

At the same time there is increased demand for it, as the economic environment places home ownership out of reach for more people. Another long-standing factor driving the demand of private rented accommodation is the shortage of social housing.

Read the full report here.

Written by Justin Cartwright

Justin Cartwright is the national director of CIH in Northern Ireland.